Correlation Between ChampionX and Archrock

Can any of the company-specific risk be diversified away by investing in both ChampionX and Archrock at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ChampionX and Archrock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ChampionX and Archrock, you can compare the effects of market volatilities on ChampionX and Archrock and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ChampionX with a short position of Archrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChampionX and Archrock.

Diversification Opportunities for ChampionX and Archrock

-0.09

Correlation Coefficient

ChampionX  Archrock

Good diversification

The 3 months correlation between ChampionX and Archrock is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ChampionX and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and ChampionX is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ChampionX are associated (or correlated) with Archrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archrock has no effect on the direction of ChampionX i.e., ChampionX and Archrock go up and down completely randomly.

Pair Corralation between ChampionX and Archrock

Considering the 90-day investment horizon ChampionX is expected to under-perform the Archrock. But the stock apears to be less risky and, when comparing its historical volatility, ChampionX is 1.66 times less risky than Archrock. The stock trades about -0.62 of its potential returns per unit of risk. The Archrock is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,586  in Archrock on September 23, 2024 and sell it today you would lose (131.00) from holding Archrock or give up 5.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ChampionX  vs.  Archrock

ChampionX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChampionX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Archrock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Archrock are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Archrock exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChampionX and Archrock

The main advantage of trading using opposite ChampionX and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChampionX position performs unexpectedly, Archrock can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Archrock will offset losses from the drop in Archrock's long position.

The idea behind ChampionX and Archrock pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.